What up, Boredz, and optional Canucks?
Not true, 'Bro. People with very low incomes and banked cash can get to very high credit scores. What matters most, above all else, is that you pay your bills on time. Do that one thing alone, and you can probably crack 800. Of course, that assumes that you're making payments on some form of trade/revolving credit.
That will help immensely.
Nobody really knows how the credit scores are calculated. None of them are calculated the same way and they guard their secret formulations very closely. Generally, we can assume what is being done by the effect your actions have on your credit score.
That's because it's not exactly correct. If you pay off a mortgage early and still pay on other debt, the payoff on the mortgage will actually help you. But if that was your ONLY debt, you could see your score fall. (See comments on debt availability ratios next.)
The second most important part of the credit score is how you manage your credit. That includes how you pay your bills, but also how much credit you have available vs. how much you have used. If you have $10,000 in credit limits on some credit cards but you've used up $9,000 (90%) of it, you'll take a hit. If you use only $1,000, (10%) you'll actually see your score increase.
This is why they say not to just close accounts without thinking it through. If you close a $6,000 card and now only have $4,000 of credit available of which you've used $1,000 (25%), your ratio just dropped a HUGE amount and it's going to ding your score pretty severely.
Of course, paying it off every month can only help. If you typically run your balances up a bit high every month, use your online bill pay and set up a recurring payment for each week to keep that average balance down between statements.
If you apply for credit too frequently, your score will fall.
So, some background:
We consider ourselves very fortunate to have no debt. We have about $90K in credit available of which we've used about $20K at any time, including the car payment (which I'm going to comment on further in a bit). Our income is not all that high, relatively speaking. Enough to live on without many luxuries beyond the thrills of the bikes and a couple of other things. Enough to be content, actually.
When we paid off the house ($230K at the time) six years ago, we had enough profit from the sale to pay for the new house in cash. As we concluded those transactions, my credit score was 820. (The highest you can get is 850.) We promptly paid off all remaining debt.
With no debt, my credit score started to fall and got down to 805-ish. As a result, when I bought the Vette last year, I went ahead and financed it instead of paying cash. Between then and now, it has gone back up to 830.
It's just the credit management. I should mention, too, that when I bought the Vette, they financed more than the value of the car, gave me a 3.85% interest rate and demanded that I finance as much as possible.
A major bank, too, not just a local community bank or credit union. They did it all over the phone in about 20 minutes and I was driving away with it.
Credit, like fire, is very powerful. Just don't let it burn you!
There are other factors in your credit score, too, but discussions on those things are all over the interwebz. www.justfuckinggoogleit.com